Spotify Says Per-Play Royalties Will ‘Likely Never Go Up’

CNN host Poppy Harlow: You’ve sat down with some Spotify executives here in New York, can you tell me about that meeting?

Blake Morgan: There were two real important takeaways from the meeting. So I was invited to an artist-only meeting to have a dialogue with Spotify.

The two takeaways were this: the executives from Spotify said that the per-stream rate that artists get will likely never go up, no matter how much Spotify grows, or how fast it grows.

And after we picked our jaws up off the ground in this meeting, after we heard that, this executive went on to explain, to trumpet how important Spotify has become in the music industry, because Spotify’s streams are now being factored in on the charts.

Harlow: So we asked Spotify to come on the program, they declined the invitation —

Morgan: — you’re kidding.

Harlow: — but they did — we did get a statement which was a broader statement, they said, ‘Artists have an absolute right to be paid for their work and protected from piracy. That’s why we pay nearly 70% of our revenue back to the music community.” What do you say in response to that, because it’s sort of like you invent an airline and then you expect people to walk. Technology progresses and the consumer, we want what we can get that’s the fastest and the best deal for us. So is the consumer demanding it?

Morgan: Well, this isn’t about technology, this is about paying artists fairly for their work. Nobody’s against the internet that I’ve ever met. Nobody’s against streaming —

Harlow: — you’re not against the service?

Morgan: No.

Streaming can work, but it can’t work if the artists who make the streaming services’ only product, music, aren’t getting paid. And that’s the reality.

It’s just math people, really – is anyone truly surprised. Zoe Keating was saying this a year ago when she figured it out. The pie can only be cut into smaller pieces, the size of the pie does NOT grow based on consumption but only Ad Revenue and Subscription revenue. As the service “scales” per stream rates will continue to drop.

Thank you, I am taking it!
Spotify can have $5B IPO in one year after conversion of Radio and streaming to discovery based music store.

$100B music industry if we can convince or FORCE Shazam, Google and few more music ID PIMPS to become overpaid and glorified cashiers of new music business. Over 2B freeloaders they serve will be able to still enjoy the best music. The minute they want to play it again at any time or any place they will have to PAY.

“the executives from Spotify said that the per-stream rate that artists get will likely never go up, no matter how much Spotify grows, or how fast it grows.”

Well, I guess that settles the debate. Daniel Ek creates Bitorrent to devalue music as much as possible, and once that’s done, offers a “legal” solution called Spotify that will give you 70% of $ 00000000000000000000000000.1 , wich what is left for you once they have deduced all..hum…costs ( the costs needed to get a zillion dollar IPO stock market), and tells you “Haha ! I made sure you are worth nothing now, so take it or leave it “.
Meanwhile, he is now on the list of the richest men in the UK according to Fortune magazine.
Al Capone rises.

My acts get stream rates up to 1.4 cents and I’ve never seen more than 3 zeros (which is incredibly poor), so nice hyperbole WhaWha.

It would be interesting to see what they meant by that statement. Did they mean the average will never go up? So it will be .005 for indies/DIYs forever? Or it just won’t go higher than the highest rates now? In other words, you’ll never see 2 cent streams or something. If it’s the former, that’s pretty shitty of them. If it’s the latter, that could still mean the average could rise.

“Did they mean the average will never go up? So it will be .005 for indies/DIYs forever? Or it just won’t go higher than the highest rates now?”

I feel like “per-stream rates” would refer to the latter – it would make a lot more sense for them to say that their rate structure is not changing and that gains for artists will come from more subscribers in general and from a better ratio of paying subscribers to free – both of which they’ve said repeatedly are their big goals

I think this is being looked at in the wrong way. It makes sense that the per-play rate for a premium user will not increase unless they increase the cost of their subscription service. Similarly, the per-play rate for the free service probably won’t increase much in the foreseeable future unless ads rates increase substantially. So the per-play rate will not increase for either tier.

However, based on the leaked rates we have seen, the per-play rate for a premium user is significantly higher than that of a free user. If Spotify can convert more free users to paying users, then the overall average per-play (free + premium users) will increase and based on many leaked rates over the last few years, has been increasing. There will be a ceiling at some point. But that can be worried about later. The most important thing right now is to increase the number of users.

As Anonymous points out, converting free users to paid would increase the rate per stream. So if Spotify executives have really said they don’t expect the rate to rise, it follows that they don’t expect to convert more free users to paid. Which goes against various things they have said previously, such as “Spotify’s model aims to regenerate this lost value by converting music fans from these poorly monetized formats to our paid streaming format, which produces far more value per listener” (in ‘Spotify Explained.’)

Yea, that’s an option too, but I don’t think they don’t care about premium. Even if they were just trying to sign as many free users as possible for the IPO (which I think we can all agree they are), it’d make them look even better to banks if they have more higher value customers, i.e. subscribers. It’d make them worth substantially more. If they really don’t expect premium to rise, they’re just bad at doing business, no matter what side of the streaming debate you’re on, and that’s just stupid.

I have a feeling they don’t even think about indies when they talk, hence the statements about the avg stream rate being higher than us indies and unsigned acts see. So they’re probably thinking about higher end major streams, which based on what I see as indie/unsigned acts, majors could be avg like .008/stream.

Belies the facts as we have seen rates increasing from launch to now, and what we are seeing in more mature EU territories which now are reporting blended rates over a penny per play.

Either way, hard to compete with free Youtube long-term no matter what. So, yes, long-term probably the rates won’t go up because Spotify will go out of business and we’ll all have to deal with six thousandths of a penny per play from YT.

The handwriting is on the wall. Artists are learning how to use Spotify and in many cases that means limiting songs on the service, whether you have a new release or catalogue that still sells. Artists need to learn to game the system instead of the system gaming them.

To SteveH’s point, the reality is a small company, with limited experience in the music business, from a foreign market came into the US market positioning themselves as the ‘game changer’ for the future of music distribution, instead of coming to the US and saying we have a great concept and we want to work with music industry to build a model that works for everyone.

Now they’re going to have to back-peddle and reposition themselves as a comprehensive resource for music discovery. The fact they didn’t understand the potential negative aspects for musicians and songwriters from an earnings perspective is the reason why so many people like myself vilify the service.

As I have believed from the beginning musicians and songwriters will only survive if they have the ability to sell their work.

I think you express it well, but I personally have a more negative view of Spotify.

Daniel “Utorrent” Ek knows all about the payment aspect and knew about it from the beginning. Just as he knows all about torrent sites and “free”.

To say that Spotify “didn’t understand the potential negative aspects for musicians and songwriters from an earnings perspective” is way too sugar coated. They absolutely did know about this but they thought they could bully us by adopting the mafia-like position of “it’s either us or “free”” (as in either us or piratical torrent sites).

I know, I know. Spotify should run like a charity and their infrastructure will just pay for itself by streaming the beauty and art and self-sustaining energy that is Taylor Swift. And all “she” wants (for she is an industry standin) is the 30% that the labels consider to be “on the table”.

Spotify shouldn’t exist if it can’t pay its suppliers of its only product a sustainable wage.
It is SPOTIFYs problem, as they don’t have a sustainable business model.
We as artists are done subsidizing Wall-Street-get-rich-quick-IPO schemes off our life’s work…sorry, the gravy boat has a massive hole in it, go fuck over some other class of people as artists have had enough.

The masters of your chosen profession have not faced digital reality for going on 20 years. All they know how to do is say they want more, or that they want a checkpoint on every device in my home.

At some point, they start looking crazy to even casual observers, and that time has passed. If today’s kids wanted music as much as they want gaming – an industry, btw, where the developers are abused serfs, and DRM is taken for granted – the music market would look a lot different.

I just made a reference in my post below about “gaming” ..
i dont know about the “serfs” part 😉
but ya, the “valuation” is a lot different in the gaming world.. I biz can put 1000’s of man hours into a game that only sells for $2.. (app)

No-one wants Spotify to run like a charity. I don’t think many people even want them to pay out a higher proportion of their revenue, which at 70% is the same as iTunes, etc. The problem is the level of the revenue itself. The advertising revenue per stream on the free tier is only around a tenth of a cent, and probably falling as advertising rates generally are falling. So it is essential to increase the paid subscription revenue. But the proportion of paid subscribers remains stubbornly low at around 20-25%, and Spotify aren’t doing anything to increase it. The charitable view of this is that they are just biding their time, waiting until they have got the free users on the hook and then cunningly increasing the incentives to switch to paid subscriptions. Unfortunately there is no evidence for this, and as the Taylor Swift controversy shows, Spotify have rejected one of the most effective ways to encourage people to switch to the paid option, which is to offer subscribers exclusive or priority access to popular content.

It has nothing to do with charity, Name2, it actually has to do with making money. We’ll forget the paid subscription part, because that would be beating a dead horse. Spotify doesn’t push paid subscriptions for one reason >> IPO. They lose twenty million subs they can kiss Goldman Sachs goodbye.

No, what I’m talking about are paid downloads, so that Spotify could have benefitted from the sale of the biggest records of the year. But then again, they backed themselves into a corner. That would have been viewed as a defeat for a service that marketed themselves as the end of paid music.

Now, they’re just going to have to suck it up while more and more artists ‘window’ more and more of their songs.

Name2, it’s about refining a concept to make it work. And BTW how are things working out for Spotify? Without the big front end investment Spotify’s gone. They’ve stayed afloat because they’re too big fail.

Music is way overvalued by the people with the rights to it. No one can make paid streaming work and/or paid downloads work without other irons in the fire (Google Play, Amazon Prime streaming, even [angelic choir] itunes). Brick and mortar music sales: essentially dead.

Only radio, with its mandated caps on licensing, has made a go of it through thick and thin.

Even today, the Google and Amazon individual-download experiences are painful and stupid.

I’ve been buying music since the age of 5 and continue to do so, so I personally don’t want to hear whining about how I’m not paying enough. Since the dawn of the modern digital era, nothing – not home delivery, not piracy, not torrenting, not even free CDs from BMG – beats the paid-tier experience I enjoy today with Tidal ($20/mo) and Spotify ($10/mo).

It might be a great experience for you as a consumer. But if the people who ultimately supply the music are not adequately rewarded for their inspiration, skills, and labour then that supply will eventually dry up, won’t it?

I’m tail end of boomer, possibly the last generation (except the infinitely excitable and eternal tweens) to highly value music, and willing to pay for it, at prices set at the height of the industry’s cultural clout: my misspent youth.

“Fake “anti-capitalist” freetards acting as a hit squad for voracious techy ultra-capitalist corporate buccaneers.”
Indeed, there is abolutely nothing “anti-capitalist” about the freetards. If anything, they are Uber-Capitalists : steal from the poor to give to the big Silicon Valley Corporations.

Daniel Eck saying per stream rates will never rise sounds like there will never be an opportunity for artists and labels to renegotiate the rates for compensation. I don’t know of many licensing agreements that exist in perpetuity.

Does anyone here understand how the system works? Rates are not a result of negatiotions. It is 70% of the revenue of a specific tier divided by the number of user streams. Do the math and you will see.

Rates can only go up if users start listening less of if the subcription fee rises. Both of which are kind of unlikely.

The only thing that goes up is the number of plays as streaming gets mainstream. That’s what counts.

How sad that they are now trumpeting their BS ‘chart’ involvement to try and swindle artists into feeling their service is good for them at the current payout. Bottom line is the Spotify per stream payouts are rigged and the 70% payout includes the hundred of millions in bribes paid to labels that will NEVER see an artist’s account . . . . . .

Quote “An average user of free, ad-supported streaming services generates revenue of around $4 a year to record companies, according to one label executive, compared with between $50 and $75 a user in the record-buying age. Spotify subscribers currently pay $120 a year, of which about 70% goes to record labels and music publishers. ”

so..
the ad-supported side only making 5% of direct purchased (subscriber or purchasing the music) simply blows my mind..

I honestly dont understand it..
TV and terrestrial Radio will use “around” 1/4 of the air time for commercials..
and are somehow able to pay their content creators..

as quick (and meaningless I admit) comparison..
A 1 hour TV show (first run) will have 15 mins worth of commercials..
that same 1 hour TV show will cost >$3 if you want to watch it without commercials..

So what is it about Spotify, pandora etc etc where “ads” are worth so much less? is it because of the devaluation of music? or is it because these services that or “worldwide” are unable to to sell “ad spots” world wide and locally ..
(IE: if I wanted to advertise on spotify tomorrow, it would most likely not happen as they dont have the structure setup to make it worthwhile )

Quote “compared with between $50 and $75 a user in the record-buying age”

well.. I hope they are not using number from the 80’s to the 90’s..
cause seriously?
those times are gone..
I was watching a documentary on the “gaming scene” last week..
what really caught my eye was how the decline of the music industry revenue does somewhat correspond with the rise of the Gaming industry revenue..
IE: people only have so much “disposable income” , a larger percentage of that goes to games (with other “entertainment industries” losing out.)

$10 per month for access to all music. Just maybe the problem is that they are selling music way the F*&^ too cheap. Question, do Spotify executives and employees work for $10 per month? That would seem the the fair price for me.

They’re not selling all the music in the world for $10. Like a library book or video rental, one’s access to the library is cut off unless one pays for more time with it. What the customer does with that precious month is reflected in payouts.

Artistic appreciation …is not , … measured at or in the same fields of emotion as one could appreciate admiring a bag of potatoes or carrots ….. artists just happen to be exchanging a living piece of their hearts …………… it’s really not up to people with minds are filled solely and completely on making exchanges to profit from , to set up standards in business for artists …… that should only be up to the individual and fellow artists!

Blastjacker – Not even close to profitable. Worse yet, they have been losing more money as they add users. Mostly because they are adding free users much faster than they are adding paid users.

An idea:
We can create “spotify format” track edits and work with the labels to only allow those edits onto Spotify. (That’s my strategy with my small label). This is what the industry did when radio first took off and it’s why the 3 min radio format exists.

Someone above asked about the $$ of advertising and why Spotify doesn’t make as much as TV. The answer is because advertising in this medium is not as valuable as in the other mediums yet. It’s that simple – the advertising world figured out quickly (about 7 years of choppy rates before it started to settle down) that Internet and mobile was great because of the one on one interaction, but poor in conversion (for the most part). They figured out that users more actively ignore the ads and they don’t have as much reach. So the price is lower.

SpotDJ – the rates are a result of revs/streams. Rates don’t move independently. If streams go up, with no corresponding increase in revenue – then everyone makes less on average per stream, but they still make the same revenue share. 70% of 100 is 70 no matter how many streams there are. UNLESS new artists come onto the system – in which case everyone makes LESS because the same pie is being split between more people.

If a company takes in $1, and spends $.70 on the total volume of music streamed, leaving $.30 for operating costs and profit, doesn’t it stand to reason that the more titles are played, the less each title will make? Or have I got my math wrong (again .. since I really do suck at math).

What I do know is radio. I’ve been doing it for close to 40 yrs. Besides being on the air (multiple stations, syndicated show) I have a small online station via Live365. I pay $186 a month in combined costs, including royalties, until my revenue hits $2000 a month, at which time it will cost me something along the lines of 50% of my revenue to the PROs.

Radio pays ASCAP, BMI, and SESAC, and if it streams (not all do) then also SoundExhange. For non-profits, the PRO rates come under a CPB blanket license (as I understood it when I was on the BoD for a small non-comm).

To the comments above about ad time. There are 16 mins of avails per hour of broadcasting on tv, and about the same for radio in the area I live in.

So, can someone who actually works in the industry address this for me, please? I seem to be a bit confused.

The only way per-stream revenue can go up is if Spotify signs up paying subscribers who don’t actually use the service very often. They need many subscribers who pay-but-don’t-use. Of course the flipside of this is if many users stream 24/7, which obviously would cause the pay-per-stream to go down. So subscriber growth in and of itself does not really help the artist on a pay-per stream basis.

On the plus side for artists, the more gross revenue Spotify generates, from both subscribers and advertisers, the more likely the 70% payout threshold will rise. The company wants to believe they are very generous paying out “nearly 70% to artists”. But that’s a 30% cut, quite a hefty margin for some software that can be run with no additional overhead as the company scales up. At some point artists should be asking for an 85% payout, something like that…

How can you expect a company to pay more than 70% of their revenue and still survive? What other successful industry has this high costs? The problem as I see it lies with an antiquated music industry that has been resistant to change because they are taking so much money from their artists. They object to anyone getting a cut of their revenue because they have enjoyed ridiculous percentages for so long. The fact is people are not going to continue to buy records or CDs like they did before. The technology has changed. I have no problem paying for access to my music but I don’t need or want a hard copy of the recording. Music companies are putting the blame on the streaming companies because it shifts the blame from them and their greedy system which has lined their pockets for so long. There is no reason an artist and its management, record company etc should not be ok with receiving 70% of the revenue generated from new technology. Embrace it or get the f out of the way. I’ll pay for it but if these artists and their labels/management want to restrict its distribution so they can wring out every last penny, plenty of people will figure out how to listen to it for free.

I just got paid $6784 working off my laptop this month. And if you think that’s cool, my divorced friend has twin toddlers and made over $9k her first month. It feels so good making so much money when other people have to work for so much less. This is what I do,,,,,,,,,,,,,,,,,,,,,

Artists: If you don’t want to be on Spotify, then don’t be on Spotify.

I know I’m going to catch a ton of heat for this. But it must be stated. Please use the best of your critical thinking skills with what I am about to say. I think you’ll find that there’s a ton of truth to this. And before you start attacking my credentials or experience or motives, or assume who I am you ought to first think about if what I am saying is true.

So you want to be fairly compensated? Ok. Totally with you. Factoring in your opportunity costs, your time, depreciating all of your capital expenses, and then the actual money spent on recording time and talent let’s say a 60 minute release has a cost of $50,000. That may be high. It may be low. Depending on how you calculate it– you could include all of the time you spent playing with yourself in the basement all those years while everyone else was out partying and getting laid. Fine. Let’s say that’s worth $100,000. LOL. So your first full length record costs you $50k and if you are going to release 10 records in your lifetime you can add $10k in damages/investment to each release. So…$60k.

To recoup your money on Spotify alone you would need 8.5 million full plays of a single song to break even. That’s quite an unfair expectation even if you are Lady-Gag-Ahhhh!.

Here are some other reasonable choices: If you want 97% of the proceeds of your music sales then use PayPal and sell your music yourself. Else get a record deal [whatever that means] and get raped that way. Else, if you don’t want to pay a ‘middleman’ for online transactions then sell your CDs directly to consumers for cash. If your music and personality moves people to buy it, you’re onto something. People buy on EMOTION not on anything else. Even if it’s talent they are looking for, the emotion they use is ARROGANCE. This is a fact. I have been in consulting for longer than most of you have been alive. I HATE sales and yet every time this is what I see. Adapt, Innovate, or Suffer. But if you choose to suffer then choose to (as Graham Chapman would say) “shut your festering gob you twit”. It’s that simple. OR create something BETTER that will get ADOPTION. Free market capitalism still works even when the greedy bastard companies are unregulated. A perfect example of this is building your own greenhouse to grow your own food rather than paying ridiculous prices for GMO foods at the grocery store. It will be a ton of work, but that’s the exchange you will have to make. If all of a sudden everyone wants your greenhouse food then you can either build more greenhouses or a bigger one, but I get so bloody sick and tired of all these whining musicians who expend more energy complaining than actually changing their world. You cannot complain your way out of a situation that you have behaved yourself into. Artists that innovate may not be wealthy, but they create a better economic and aesthetic world for everyone. If you can’t handle that then be a REAL artist and refuse to accept money for your works. nuff said.

Its less difficult to create change when there are popular leaders (Mr Brooks and Ms swift) helping create a momentum unfortunately many popular artists who are multimillionnaires and othe other team of corporations are telling the world how important an amount of 0.0005 of a cent is to them and should be for everyone ……. these do so much drugs they believe everyone will believe them …. hahahahaha